UPS Wins and then Loses Anyway

Like the Bristol-Meyers-Squibb case mentioned in today's PointofLaw.Com note by Michael Krauss, UPS lost even though it won. UPS was sued by the IRS for a tax law issue that was turned into a consumer class action against the company. The company's tax case was eventually resolved in UPS's favor, but the consumer complaint still lived and UPS settled Friday for a notional value of $205 million in vouchers. Essentially, UPS sold insurance on packages it transported. UPS set up a Bermuda subsidiary to reinsure the insurance it provided to its customers. The IRS claimed that this wasn't really insurance because there was no real risk transfered this was a sham transaction and the sole purpose was to transfer profits to Bermuda to avoid the corporate income tax. After UPS lost at trial, the consumer class action case was instituted against UPS. UPS eventually won in the 11th circuit (the court stated that having this arrangement had a legitimate business purpose) but the consumer class action still played on... The lawyers expect to receive 19.3 million in fees. See also the Atlanta Business Chronicle.